United States v. Nicodemo Scarfo
PRECEDENTIAL (Opinion Filed: July 15, 2022) (2022)
Rule of Law:
The good-faith exception to the Fourth Amendment's exclusionary rule applies to cell site location information (CSLI) collected by government investigators under a Stored Communications Act (SCA) court order before Carpenter v. United States rendered such searches unconstitutional without a warrant. Furthermore, while Honeycutt v. United States generally limits criminal forfeiture to property a defendant personally acquired, a primary leader and organizer of a criminal enterprise who exercised dominion and control over its proceeds may still be held jointly and severally liable for the full forfeiture amount.
Facts:
- Nicodemo Scarfo, a 'made member' of the Lucchese La Cosa Nostra (LCN) family, and Salvatore Pelullo, an LCN 'associate' with close ties to Scarfo's father, were required to generate and share criminal profits with the LCN family.
- In early 2007, Scarfo and Pelullo, along with others including William Maxwell, identified FirstPlus Financial Group, a dormant public mortgage company receiving substantial bankruptcy payments, as an opportunity for illicit gain.
- Pelullo and William Maxwell orchestrated a takeover by sending threatening letters, purportedly from a disgruntled former employee, to FirstPlus's CEO Daniel Phillips and board members, alleging financial and personal misconduct.
- Phillips and the FirstPlus board swiftly resigned under duress, allowing Pelullo and his associates to install a new board, including John Maxwell as CEO (a largely titular role) and William Maxwell as FirstPlus's 'special counsel' with significant authority.
- The new leadership, controlled by Pelullo and William Maxwell, systematically drained FirstPlus's assets through sham consulting agreements with Pelullo’s company (Seven Hills Management, LLC) and Scarfo’s company (Learned Associates of North America, LLC), funneling large monthly fees to them for little to no actual work.
- FirstPlus was also fraudulently induced to acquire three shell companies (Rutgers Investment Group, LLC, Globalnet Enterprises, LLC, and The Premier Group, LLC) owned by Pelullo and Scarfo at vastly inflated prices, with William Maxwell facilitating the dubious valuations.
- Scarfo, Pelullo, and William Maxwell used the siphoned funds for personal luxury purchases, including houses, jewelry, a Bentley, a yacht, and a plane.
- The conspirators' actions ultimately bankrupted FirstPlus, leaving its over 1,200 public shareholders with worthless stock and its accounts nearly empty by May 2008.
Procedural Posture:
- In October 2011, a federal grand jury in the District of New Jersey issued a twenty-five-count indictment against thirteen defendants, including Nicodemo Scarfo, Salvatore Pelullo, William Maxwell, and John Maxwell, related to the FirstPlus scheme.
- In December 2011, the District Court designated the matter as a 'complex case' and granted an indefinite continuance, tolling the deadlines of the Speedy Trial Act.
- In early 2013, Pelullo's motion to dismiss the charges against him on Speedy Trial Act grounds was denied by the District Court.
- Multiple defendants, including William and John Maxwell, filed motions to sever their trials from Scarfo's and Pelullo's, which the District Court denied.
- On January 8, 2014, the trial for the seven remaining defendants (Scarfo, Pelullo, William Maxwell, John Maxwell, McCarthy, Adler, and Manno) began with an anonymous jury empaneled.
- On July 3, 2014, the jury returned its verdict, convicting Scarfo, Pelullo, and the Maxwell brothers on most charges, while acquitting McCarthy, Adler, and Manno.
- After the trial, several post-trial motions, including attempts to secure new trials, were filed by the defendants and subsequently rejected by the District Court.
- The District Court sentenced Scarfo and Pelullo to 360 months' imprisonment, William Maxwell to 240 months, and John Maxwell to 120 months, also ordering restitution and holding them jointly and severally liable for a $12 million forfeiture.
- The defendants each timely appealed their convictions and sentences to the Third Circuit Court of Appeals, and their appeals were consolidated.
- In August 2017, the Third Circuit granted Pelullo's request to remand his case for the District Court to address his motion for a new trial based on a claim that one of his attorneys had an undisclosed conflict of interest.
- In February 2019, following briefing and an evidentiary hearing, the District Court denied Pelullo's new trial motion, and he appealed that ruling, which was consolidated with the other ongoing appeals.
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Issue:
1. Does the good-faith exception to the exclusionary rule apply to cell site location information (CSLI) obtained by government investigators under a Stored Communications Act (SCA) court order prior to the Supreme Court's ruling in Carpenter v. United States? 2. Does the imposition of joint and several liability in a criminal forfeiture order violate Honeycutt v. United States when applied to a defendant whose role was akin to a subordinate, versus a primary leader, in a racketeering conspiracy?
Opinions:
Majority - Jordan, Circuit Judge
Yes, the good-faith exception to the exclusionary rule applies to the Cell Site Location Information (CSLI) obtained against Pelullo. The government’s collection of CSLI in 2007 and 2008, pursuant to a court order satisfying the Stored Communications Act (SCA), was objectively reasonable at the time, even though Carpenter v. United States (2018) later held that obtaining CSLI without a warrant constitutes a Fourth Amendment search requiring probable cause. The court noted that there was no binding precedent at the time requiring a warrant, and prosecutors reasonably relied on the plain text of the SCA and the court orders. Applying the exclusionary rule would not serve its deterrent purpose given the objectively reasonable good-faith belief in the legality of the conduct. Pelullo's claims of government misrepresentation in obtaining CSLI were forfeited by not being raised pretrial, and any error in CSLI admission was harmless due to other corroborating evidence. No, the imposition of joint and several liability for the full forfeiture amount does not violate Honeycutt v. United States for Pelullo, as he was a primary leader and organizer of the FirstPlus scheme who exercised dominion and control over the entirety of the proceeds. However, it does violate Honeycutt for John Maxwell. The court found that Pelullo 'called all the shots,' gave definitive commands, and directed fund disbursements, demonstrating his ownership of or benefit from the proceeds. In contrast, the government conceded that John Maxwell’s role was akin to a subordinate and accepted that his forfeiture should be limited to the proceeds he personally acquired. The court affirmed the application of Federal Rule of Evidence 404(b) for the admission of La Cosa Nostra (LCN) evidence to show Scarfo's and Pelullo's motive and control, noting it was relevant, offered for a non-propensity purpose, and accompanied by adequate limiting instructions. It also affirmed the denial of severance for the Maxwells, citing the strong preference for joint trials in conspiracy cases and the jury's ability to compartmentalize evidence. The court found no Speedy Trial Act violation, as the case was complex, and Pelullo acquiesced to and even sought delays. Pelullo's ineffective assistance of counsel claim against attorney Farrell was rejected, as the District Court found Farrell's testimony (that his aggressive tactics were driven by his own unrelated investigation) unreliable, and there was no evidence that the prosecution knew of the investigation or that Farrell's interests diverged from Pelullo's. The RICO conspiracy convictions were upheld, as the special interrogatories did not constructively amend the indictment but rather narrowed the bases for conviction, and multiple predicate acts independently supported the convictions. William Maxwell's convictions for firearm and wire fraud conspiracy were supported by sufficient evidence. Juror-related issues, including delayed disclosure of a juror's fear, alleged jury coercion due to time constraints, purported coercion of a substituted juror, and the District Court's limited inquiry into juror misconduct, were found to be harmless error or within the court's discretion given the context and ameliorating instructions. Pelullo's sentencing challenges regarding guidelines calculation, loss amount, and victim count were rejected, as the District Court's findings were reasonable and supported by the evidence. Pelullo's CAFRA rights were waived, and the delay in forfeiture initiation did not violate his due process rights, particularly given his inaction and lack of specific demonstrated prejudice, despite the government's negligent handling of the seized yacht.
Analysis:
This ruling significantly reinforces the good-faith exception in the context of technological advancements and evolving Fourth Amendment jurisprudence, offering protection to law enforcement reliance on existing statutory authority before new Supreme Court precedent clarifies constitutional requirements. Crucially, it provides nuanced guidance on the scope of criminal forfeiture post-Honeycutt, distinguishing between the 'personally acquired' standard for minor participants and the potential for joint and several liability for enterprise leaders who exerted control over all illicit proceeds. The case also reaffirms the broad discretion afforded to trial courts in managing complex, multi-defendant cases, including the admission of 'other acts' evidence (Rule 404(b)), denial of severance, and handling of juror issues, especially where curative instructions are given and the jury demonstrates selective verdicts.
